Articles

SLOVAK LABEL PLANT GOES FOR GROWTH


With rapid growth in Eastern Europe one Slovak printer is looking to the west for technological know how and an investing partner.

Any look at the growth of self-adhesive materials and roll-label presses soon shows that the Eastern European countries are becoming an increasing force in the marketplace – after investing in some of the most sophisticated combination of UV flexo presses to process filmic or speciality labelstocks.

Such growth and change is not too difficult to understand in economies which are moving to a market-led system and increasing competitiveness in manufacturing and sales.

For example, the change in the political system in Slovakia – which was Czechoslovakia until 1993 – has seen the introduction of competitive producers from Western Europe and North America into the country which, in turn, has led to Slovak procedures realising the importance of packaging and labelling to higher quality standards.

Yet, prior to the change in the country (with the exception of one monopoly producer and a few small companies) there did not exist manufacturers who could meet these new demands from customers for high quality production – nor meet the sheer volume requirements of a new and open market.

The consequence of all this is that new private companies soon began to be established in Slovakia. Companies which could rapidly react to the new quality demands and requirements of packaging and labelling in a changing market. Companies such as Printon.

Established in 1991 in the town of Vranov nad Topl’on in Eastern Slovakia, Printon is strategically sited to not only develop the Slovak market but also to penetrate into the Ukranian, Hungarian and Polish markets. Privately owned and currently employing some 18 people (with an average age of 29) the company manufacturers sewn and self-adhesive labels for the clothing and textile sectors using Paxar 8,500 and 7,500 machines, has full colour sheet-fed offset printing facilities and produces hang tags, boxes and packing.

Customers of the company’s products include middle and large Slovak producers of textiles and shoes, foreign textile and shoe companies now manufacturing in Slovakia, and Slovak producers of pharmaceuticals and foods. Turnover has grown from US$ 6,700 in 1991 to US$ 500,000 in 1995, with the company owning lucrative real estate near the centre of the town and which has the potential for building new manufacturing or distribution facilities.

As a comparison with western countries it is also perhaps interesting to look at the business environment in which Printon operates. As a country, the Slovak Republic has a population of 5.5 million; currency is Slovak crowns (100 SK = 3.4 USD); annual inflation is 7.5 per cent and unemployment is currently around 13.5 per cent. Working hours are 42.5 a week and the average monthly salary in the country is US $250. Social, health and sickness insurance is 38 per cent, deducted from the salary of the employee; VAT is 23 per cent.

Prices for renting business space (excluding energy) in Eastern Slovakia are around US $100-200/square metres/year. Electricity costs are US $85/1000 kwh and heating costs are US $7/GJ.

So what does Printon offer its customers? Firstly, the owners and top managers of the company represent a team of young people with an excellent knowledge of the domestic market. Economic thinking is quite advanced an they have good experience in the foreign market.

According to commercial director Ing Marhulik Ivan, the company is ‘prepared to manage even the most difficult printing requirements and to work virtually unlimited hours (up to 12-16 hours a day). Specifically targeted at customers’ needs, Printon’s philosophy is to provide integrated services in both the packaging and labelling of products – that is the total supply of labels, hang tags and boxes to the sectors it serves.’

Good cash flow and accounting procedures are followed and the company has successfully grown to date without any financial problems. Now however, the company is looking to grow even faster and aims to target its future growth potential at foreign companies from western Europe and the USA who are producing their goods in Slovakia – or who are buying finished Slovak goods.

Such potential companies, Printon believes, are at the same time looking for Slovak producers that have the ability to produce high quality labels and packaging at competitive prices. Being located in eastern Slovakia, the company is also looking to provide a quality label service to European and American companies manufacturing goods in the Ukraine, Poland and Hungary. It all sounds an exciting challenge and opportunity which Printon would like to rapidly develop – but they do have something of a problem.

‘While we do not have any financial problems at present,’ explained Marhulik Ivan, ‘neither do we have the financial means to invest in the latest sophisticated technological equipment or in the building of a new factory facility. Our financial sources in Slovakia are very restricted and very expensive. The Slovak Bank for example, requires guarantees of around 130-150 per cent of the loan requirement before making credit available. Even then, interest rates are from 16-20 per cent, and only available on a short term basis.’

The solution, believes Printon, is to find a financially strong foreign partner with whom they can co-operate in establishing a specialised label and packaging plant – printed packaging, labels and hang tags – to produce high quality and competitive products in Slovakia.

‘Such co-operation’, says Marhulik Ivan ‘should enable Printon to introduce more advanced technologies to Slovakia, should provide technological transfer and the development of the companies’ workers, and should also provide the possibility to penetrate new markets and sectors.

With an expected dynamic development of the packaging and label industry in Slovakia over the next eight to 10 years of over 20 per cent per annum, Printon should readily achieve its objective of finding a financially strong foreign partner from Western Europe. Other Eastern European label and packaging printers will undoubtedly follow in the years ahead.

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